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Hedge Fund Collapse..........
Old 09-27-2006, 11:06 AM   #1
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Hedge Fund Collapse..........

read in the WSJ the other day that Aranth (spelling?) Advisors took a big bet and lost.........and have lost 65% of their value............or 6.5 billion dollars...............

Brewer, any comment
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Re: Hedge Fund Collapse..........
Old 09-27-2006, 11:14 AM   #2
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Re: Hedge Fund Collapse..........

They were idiots with little/no risk controls. Plain and simple.
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Re: Hedge Fund Collapse..........
Old 09-27-2006, 11:16 AM   #3
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Re: Hedge Fund Collapse..........

Quote:
Originally Posted by brewer12345
They were idiots with little/no risk controls.* Plain and simple.
Makes sense.............what about LTCM? Those guys on paper were not idiots......
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Re: Hedge Fund Collapse..........
Old 09-27-2006, 11:19 AM   #4
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Re: Hedge Fund Collapse..........

Quote:
Originally Posted by FinanceDude
Makes sense.............what about LTCM?* Those guys on paper were not idiots......
Caveat Emptor, as with all investments.
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Re: Hedge Fund Collapse..........
Old 09-27-2006, 11:20 AM   #5
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Re: Hedge Fund Collapse..........

A good idea about why more common folks are headed into Hedge Funds from The Economist:
http://www.economist.com/finance/dis...ory_id=7912700

In part:
"And yet investors may be willing to gamble, despite the higher fees, because they desperately need high returns. The bear market between 2000 and 2002 brought a sober reassessment of the future returns likely from equities and bonds. With bonds yielding 4-5% and equities returning perhaps 3% on top, composite future returns of 6% or so looked inadequate. Peter Harrison, chief executive of MPC, a fund manager, says that American pension funds have analysed their liabilities. “They need more than 6% to make up the shortfalls in their funds. Whether they earn alpha or not, they have to roll the dice and try to get it."
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Re: Hedge Fund Collapse..........
Old 09-27-2006, 12:54 PM   #6
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Re: Hedge Fund Collapse..........

Quote:
Originally Posted by FinanceDude
Makes sense.............what about LTCM?* Those guys on paper were not idiots......
Bill Sharpe also says that it's a good thing the Nobel Committee can't reclaim their awards.
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Re: Hedge Fund Collapse..........
Old 09-27-2006, 01:09 PM   #7
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Re: Hedge Fund Collapse..........

Quote:
Originally Posted by yakers
A good idea about why more common folks are headed into Hedge Funds from The Economist:
http://www.economist.com/finance/dis...ory_id=7912700

In part:
"And yet investors may be willing to gamble, despite the higher fees, because they desperately need high returns. The bear market between 2000 and 2002 brought a sober reassessment of the future returns likely from equities and bonds. With bonds yielding 4-5% and equities returning perhaps 3% on top, composite future returns of 6% or so looked inadequate. Peter Harrison, chief executive of MPC, a fund manager, says that American pension funds have analysed their liabilities. “They need more than 6% to make up the shortfalls in their funds. Whether they earn alpha or not, they have to roll the dice and try to get it."
Haven't they heard of Vanguard??
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Re: Hedge Fund Collapse..........
Old 09-27-2006, 01:14 PM   #8
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Re: Hedge Fund Collapse..........

Quote:
Originally Posted by FinanceDude
Haven't they heard of Vanguard??
I think The Economist article does somewhat explain why there is such a flow of money into hedge funds, even by some who should know better. And it is indeed a backhand endorsement of the Vanguard approach.
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